Felix Salmon

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If you have a bit of time today, the official JP Morgan post mortem on the London Whale affair is well worth reading. The whole thing is 132 pages long, although the executive summary — which is very clearly written — is only 17 pages.

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Ina Drew — the JP Morgan executive who famously “loves crises” — is out; it seems the buck for the $2 billion trading loss in her unit has stopped with her. And slowly, a few shapes are beginning to emerge from the fog of what exactly happened here.

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Whenever I write about banks’ rising Value-at-Risk, a bunch of commenters tells me that duh of course VaR is rising, because VaR is a function of volatility, and volatility has gone up. So here’s my question: can someone come up with a baseline VaR chart, for a hypothetical bank which had, say, a fixed $1 million investment in the S&P 500. What would its quarterly Value-at-Risk have looked like over the past couple of years?

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Back in March, Rick Bookstaber published a blog entry entitled “The Fat-Tailed Straw Man”, which seems to imply that Nassim Taleb attacks Wall Street practices on the grounds that its practitioners believe in normal distributions.